Correlation Between Bread Financial and Credit Acceptance

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Can any of the company-specific risk be diversified away by investing in both Bread Financial and Credit Acceptance at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Bread Financial and Credit Acceptance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bread Financial Holdings and Credit Acceptance, you can compare the effects of market volatilities on Bread Financial and Credit Acceptance and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Bread Financial with a short position of Credit Acceptance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bread Financial and Credit Acceptance.

Diversification Opportunities for Bread Financial and Credit Acceptance

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Bread and Credit is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Bread Financial Holdings and Credit Acceptance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credit Acceptance and Bread Financial is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Bread Financial Holdings are associated (or correlated) with Credit Acceptance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credit Acceptance has no effect on the direction of Bread Financial i.e., Bread Financial and Credit Acceptance go up and down completely randomly.

Pair Corralation between Bread Financial and Credit Acceptance

If you would invest  7,179  in Bread Financial Holdings on August 24, 2024 and sell it today you would earn a total of  1,117  from holding Bread Financial Holdings or generate 15.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy95.24%
ValuesDaily Returns

Bread Financial Holdings  vs.  Credit Acceptance

 Performance 
       Timeline  
Bread Financial Holdings 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Bread Financial Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Bread Financial may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Credit Acceptance 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Credit Acceptance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Credit Acceptance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bread Financial and Credit Acceptance Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bread Financial and Credit Acceptance

The main advantage of trading using opposite Bread Financial and Credit Acceptance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bread Financial position performs unexpectedly, Credit Acceptance can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Credit Acceptance will offset losses from the drop in Credit Acceptance's long position.
The idea behind Bread Financial Holdings and Credit Acceptance pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Share Portfolio module to track or share privately all of your investments from the convenience of any device.

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